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Goldman Acquiring Fee-Based Advisory

Goldman Sachs announced plans to acquire The Ayco Company, one of the country’s oldest fee-based advisory firms. The deal, which would add $6 billion to Goldman’s $347 billion in assets under management, is notable for Goldman’s interest in a business comprised of middle-rich clients. Goldman is known for its focus on clients with upwards of $50 million in assets. "Ayco has some of those clients, but a lot of them wouldn’t qualify as traditional Goldman Sachs clients," says Chip Roame, managing principal at Tiberon Strategic Advisors in Tiberon, Calif.

Ayco, founded in 1939, has more than 1,000 associates, including lawyers, CPAs, estate planners and other professionals. Ayco has more than 9,000 clients, most corporate executives that it targets via their employers. Marketing itself as a "personal CFO," the Albany, N.Y.-based firm provides free financial planning sessions as an employee benefit. Not surprisingly, these sessions often generate new relationships and assets.

"They have a fabulous business model," says Roame. "They’re going after clients from an institutional basis but not going after the institution’s money itself."

The company’s chief executive officer, John Breyo says the merger with Goldman will improve his company’s brand recognition and, by extension, its ability to add clients. For Goldman, the deal, "enhances the private wealth management business that they have," says one analyst. He added that relative to Goldman’s asset management practice, the Ayco deal is "not an enormous addition."

Terms of the acquisition were not disclosed. Assuming the deal closes as expected this summer, Ayco will operate as a wholly-owned subsidiary within Goldman’s private wealth management practice.